Unit 1: Introduction to Economics Flashcards
Economics
The study of how people and societies use limited resources to satisfy unlimited wants; the management of scarcity and choice.
Individual Choice
The decision by an individual of what to do, which necessarily involves a decision of what not to do.
Resource
Anything, such as land, labor, and capital, that can be used to produce something else; including natural resources (from the physical environment) and human resources (labor, skill, intelligence).
Scarce
In short supply; not enough resources to satisfy all the various ways a society wants to use them.
Opportunity Cost
the real cost of an item; what you must give up to get it.
Trade-off
A comparison of costs and benefits of doing something.
Marginal Decision
A decision made at the “margin” of an activity to do a bit more or a bit less of an activity.
Marginal Analysis
The study of marginal decisions.
Interaction
My choices affect your choices, and vice versa.
Trade
In a market economy, individuals provide goods and services to others and receive goods and services in return.
Gains from Trade
By dividing tasks and trading, people can get more of what they want through trade than they could if they tried to be self-sufficient.
Specialization
Each person in the task that he or she is good at performing.
Equilibrium
An economic situation in which no individual would be better off doing something different.
Efficient
Description of a market or economy that takes all opportunities to make some people better off without making other people worse off.
Equity
Fairness; everyone gets his or her fair share.
Model
A simplified representation of a real situation that is used to better understand real-life situations.
Factors of Production
The resources used to produce goods and services. Labor and capital are examples.
Comparative Advantage
The advantage an individual or nation has in producing a good or service; occurs when the opportunity cost of producing the good or service is lower for that individual or nation than for other producers.
Absolute Advantage
The ability of an individual or group to carry out a particular economic activity more efficiently than another individually.
Circular Flow Diagram
A diagram that shows how money moves through an economy in a constant loop from producers to consumers and back again.
